Transfer value in home sales: the market value criterion

Determining the transfer value of a property is a critical step when filing a tax return after selling a home. An error in this calculation can lead to an incorrect settlement of capital gains or losses for Personal Income Tax (IRPF).

What the DGT has ruled

The Dirección General de Tributos (DGT) has specified that the transfer value is the actual amount for which the disposal is carried out. This means that the amount effectively paid in the transaction must be taken into account. However, there is a fundamental limit: this amount cannot be lower than the normal market value.

If the price agreed upon in the deed is lower than the market value, the latter will prevail for the calculation of capital gains or losses. It is important to distinguish this concept from the taxable base of Transfer Tax (ITP), which is linked to the Cadastre reference value, whereas for IRPF, the criterion of real value versus market value applies.

What this means for you

If you are an individual selling a home, it is not enough to declare the price stated in the contract if it is below what the property would be worth under normal market conditions. The applicable regulations, based on the IRPF Law and the General Tax Law, require that the calculation base reflects the economic reality of the transaction.

For residents or expatriates with real estate assets in Spain, this criterion is decisive in avoiding potential inspections or requests from the Tax Administration due to an undervaluation of the transfer.

What you should do

In the event of a real estate disposal, it is necessary to:

• Verify that the agreed sale price is consistent with the market values of the area and the characteristics of the property.
• Clearly differentiate between the Cadastre reference value (used for other taxes) and the market value (necessary for IRPF).
• Assess each particular situation with a professional to ensure that the calculation of capital gains complies with current regulations.